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Crisis Squared

The nation's foreclosure woes hit home for a Slavic Village woman

It's a bitter homecoming when Susan Bard tours her old Slavic Village neighborhood. As she circles the block in her beige mini-van, she spins tales about the place like the cab driver she once was.

She still sees potential — for the neighborhood, and even for herself. After all, she could afford one of these houses. At today's prices, she can even muse about becoming a landlord. She knows who owns each home and what they paid. She knows how long they've lived there and whom they get along with.

Until this summer, one of those homes belonged to her. She pulls up in front of it and wells up with tears as her story begins to unfold in a patchwork that defies chronology.

In July, Bard was evicted from the East 67th Street home where she had lived for seven years, mostly by herself. Her ouster marked the crescendo in a years-long march through a seemingly well-intentioned real estate hell.

It all began in 2003, when Bard signed a land contract to buy the house for $68,800. The terms called for a down payment of $6,800, followed by two years' worth of $900 monthly installments and a $40,400 balloon payment.

Unlike a typical home purchase, land contracts are made directly between the buyer and seller: They typically involve a future sale price, with interim payments counted toward the final sum. Bard's monthly payments enabled her to build equity without needing a huge lump of cash for a down payment and without having to deal with a bank — a major benefit, given her spotty credit history.

Today, such contracts elicit groans from the people charged with cleaning up the foreclosure crisis. More often than not, they say, land contracts rip off the buyer in the fine print. But Bard was careful: She filed the contract with the county recorder, and unlike many such deals, this one went off as written: In March 2005, she got the deed.

But that's when her troubles started. Because her mother had better credit and therefore could get better loan terms, Bard asked Mom to take out a loan of $60,000 to cover the balloon payment and a bathroom renovation. For this reason, she put the house in her mother's name. Bard lived at the Slavic Village house and made monthly payments to her mother, who in turn made each payment to the bank.

At one point, her mom refinanced the loan and added to it for improvements to her own home in Kent. But Bard's payment system continued without a hitch — at least until illness took hold: Her mother was diagnosed with leukemia in 2006, and by 2007 she had missed two payments on her daughter's home, caught up as she was in her own failing health.

Bard tried to make up the missed payments as soon as she learned about them, but the holder of the mortgage, Washington Mutual, refused to accept her money because her name was on neither the loan nor the deed for the house — standard practice across the industry.

Far different from standard practice is a mortgage holder's move to begin foreclosure proceedings after only two missed payments. But it seems the timing of Bard's oversight played a pivotal role in her ensuing woes: In September 2008, Washington Mutual became known as the largest bank failure in U.S. history.

"We find out in the end that they just wanted to empty houses and return them to Fannie Mae," says Bard. "That was their bailout."

Bard contacted Neighborhood Housing Services, the Cleveland arm of a national nonprofit group that supports home ownership through loans, education, and other programs. She was assigned a foreclosure counselor whom she says advised her not to worry — and not to attend foreclosure hearings, because doing so wouldn't make a difference. Besides, she was told, NHS had programs that could get her back in her house.

NHS told her that if she paid Washington Mutual a down payment and closing costs totaling $7,000, the bank would allow her to take over the loan — and NHS would even fork over $2,000 to get the ball rolling. But when the time came for the money to change hands, she says, NHS refused to give her the down payment because the house — which was in her mother's name — wasn't technically owner-occupied.

"That was never a secret," says Bard.

So she borrowed the $2,000 from a friend, scraped together the rest on her own, and in December 2007 made a $7,000 payment to Washington Mutual. That's when she was told over the phone that the loan couldn't be transferred to her name — and that the bank had no intention of returning her money.

"They called it an attempt to recover debt," she says.

Complicating matters further, Bard's mom died in 2009. Her home in Kent is now tied up in probate, with Bard and two siblings bickering over an acceptable selling price. The painfully slow pace of settling the estate has not helped Bard's situation. Fannie Mae — the Federal National Mortgage Association — assumed the title to the Slavic Village house earlier this year, while Bard was still living there.

A real estate agent helped Bard go through NHS to buy the house from Fannie Mae, but that effort also stalled over a policy matter: Fannie Mae doesn't sell foreclosed homes to immediate family members. The rule is designed to prevent people from strategically defaulting on their loans in order to reacquire homes on the cheap.

"Anyone purchasing the property on behalf of, or to the benefit of, the former owner should pay a price at least equal to the make-whole value," says Fannie Mae spokesman Jason Vasquez. That would leave Bard paying the full amount of her late mother's outstanding debt: $83,350 — more than $15,000 more than Bard had paid for the home.

So on July 1, says Bard, "They came and put me out in the street" while the neighborhood watched. An agent charged by Fannie Mae to resell the property stood by in his Hummer.

"Why are you doing this?" some neighborhood kids asked him.

"This is what happens when you don't pay your bills," he responded.

Three months later, Bard is still living in a friend's basement. She hasn't worked since a car accident in 2008 that led to the discovery of her own cancer. Now she receives food stamps and awaits a hearing for possible disability benefits.

She clings to hope that Fannie Mae might turn the property over to the Cuyahoga County Land Bank, which sells pools of foreclosed properties for $201 each. If that were to happen, she may have a shot to repurchase the home with money from her mother's estate.

But according to Land Bank Director Cheryl Stephens, in order to be included in one of those pools, Fannie Mae would have to have valued the home at less than $20,000 — $4,000 less than Bard paid in her original land contract, and a fraction of the value appraisers put on it.

In the meantime, Bard is working with a lawyer to settle her mother's estate and to sue NHS for what she believes was faulty advice. For that reason, NHS Director Louis Tisler declined to be interviewed for this story.

"I think NHS hurt me more than they helped me," she says. "I would like to not sue them. I would like them or the Land Bank to buy the house, and I'd pay them back. I just don't want to get screwed again. I'm getting by on friends and air."